Upstream oil and gas producers to shine in Q4, but OMCs and gas distributors face profit squeeze

ET Intelligence Group: Upstream oil and gas producers are expected to post strong earnings growth in the March quarter, driven by a sharp rise in crude oil prices, while downstream oil marketing companies (OMCs) and city gas distribution firms are likely to report weaker results. Analysts expect operating profit before depreciation and amortisation (Ebitda) for upstream companies to rise 6-49% quarter-on-quarter while revenue may grow 17-22%. For OMCs, Ebitda is projected to decline 8-50% sequentially though revenue is expected to increase 17%-30%, reflecting margin pressure.

Brent crude averaged around $81 per barrel in the March 2026 quarter, up nearly 28% sequentially, boosting net crude realisations for producers. Nomura Financial Advisory and Securities expects Ebitda for ONGC and Oil India to increase 23% and 49% respectively from the previous quarter. Upstream companies are expected to register marginal declines in oil and gas production and sales volumes, mainly due to natural field decline and maintenance shutdowns. However, this will be more than offset by higher crude prices.

OMCs such as Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are expected to register sequential earnings pressure due to lower product realisations as fuel prices remained stable despite a spike in crude prices. The weighted average gross marketing margins on auto-fuel dropped sharply to about ‘1.7 per litre in the March quarter from ‘5.2 per litre in December quarter. It was also well below the historical average of around ‘3.5 per litre, noted JM Financial Institutional Securities in a report.

LPG under-recoveries for OMCs are likely to rise quarter-on-quarter to around ‘10,000 crore in the March quarter from about ‘1,900 crore in the prior quarter on account of a sharp rise in global LPG prices due to the ongoing supply disruption due to war in West Asia.

Kotak Institutional Equities expects HPCL’s Ebitda to fall 51% quarter-on-quarter in the March quarter, while BPCL and IOC are likely to report declines of 28% and 22%, respectively.

Brokerages expect the earnings of oil-to-chemical segment of Reliance Industries to decline by higher crude cost, rise in shipment and insurance cost, losses in the retail fuel segment, diversion of propane to produce LPG, and increase in prices of Naphtha, a major feedstock.Gas utilities and city gas distribution (CGD) companies are expected to report a soft quarter hit by LNG supply disruptions through the Strait of Hormuz, higher spot LNG prices and rupee depreciation. India’s overall gas demand in the March quarter is estimated to have declined around 10% sequentially, as LNG imports were disrupted. This weighed on volumes and profitability across the gas value chain. GAIL’s Ebitda is expected to drop 12-38% sequentially, led by weaker gas trading margins, lower transmission volume and losses in petrochemicals.